David, although I like the thought provoking idea, I'm not convinced the word Hypocrisy is the most appropriate.
I think the executives are scared to get into any kind of new trend, and the easiest way to deal with any scary thing is to put hurdles in the way.
As you're well aware, social media isn't just about marketing, it's about the way people communicate in general, and has an impact on employee's productivity, PR and legal risks, can effect some serious IT issues (as I've learned from a major bank I'm working with, where the 1000+ employees in the building suck up the bandwidth with Facebook and youtube, and put the banks' system in jeopardy) - getting involved in social media has tremendous risks, and the return is not completely understood.
If we're focusing on marketing activities only - yes, it could be hypocrisy, as ROI from any branding activity (naming rights, sponsorships, events, billboards, business cards and stationary, to name a few) is seldom measured.
Nevertheless - I think the video is powerful :)

New research - published here for the first time - proves that executives who demand that Social Media ROI be calculated are hypocrites. HYPOCRISY It's ridiculous that executives require marketers to calculate ROI (Return on Investment) on one form of real-time communications: Social media like T...

I think David (MScott) is right- sometime how you react to what has happened, will determine the severity of what really happened.
Having sex with others, while you're in a relationship, is a horrible thing. Being unfaithful, makes you lose your partner's trust, and could have legal implications. That's what happened.
There are several ways to handle what happened, to minimize the effect, for example:
1. The David Letterman way: Get up on stage, and confess, before it gets out of hand.
2. The Bill Clinton way: deny it publicly for as long as possible, and then be remembered forever as a "dress stainer".
The reaction choice is now yours.
Sure, it is a lot smarter to preserve your integrity, and your "brand" (@kay plantes), but that's is a bit late for that. I think the Letterman way of handling the situation he stupidly put himself into, is the right one.
The PR effect is reflected well in the press (@amanda) - it will be a story with an end, and a couple of years from now the whole thing will be erased from public memory. As opposed to the Bill Clinton story.

American television personality David Letterman used his Late Show on October 1 to confess to an extortion attempt from someone threatening to expose affairs that Letterman had with staffers. I'll leave commentary about the tawdry aspects of this to the thousands of other people who are weighin...

@davidKoopmans
Absolutely right! I never said what they were doing is smart, but if they have an online debate, this topic will definitely get good page ranking. Better not respond online, respond offline, and get bloggers to talk about the response.

When I was in Australia early this month, it seemed the entire social media world was buzzing about Cotton On and the corporate communications crisis that played out on blogs and Twitter. In particular, I heard many people discussing the perceived poor response by the company. Cotton On markets ...

Some would say: "It's a publicity stunt". Regardless to the company's social media activity, it looks like they have created an emotion-evoking campaign, right or wrong is irrelevant, because the idea was to evoke a strong emotion and get people talking about the brand(in this case - Outrage).
Cotton On maybe not so good at responding to the angry mob, but what they are good at is using the social media gods (AKA @DMscott)to write about them, and put up pictures of their other products, and link to their website... you get my point.
It is always easier to get forgiveness than to get permission. They will probably eventually say "sorry", we'll forgive them and buy other cute T-Shirts with slogans about boobs.
If the company had to respond to the outrage on Twitter, I think it would have made matter worse.
My approach would have been:
Let everyone get it all out, then come up with a public apology, explaining it was all a mistake, and giving a nice public donation to the appropriate charity.
Win-Win.

When I was in Australia early this month, it seemed the entire social media world was buzzing about Cotton On and the corporate communications crisis that played out on blogs and Twitter. In particular, I heard many people discussing the perceived poor response by the company. Cotton On markets ...